OMB Proposes to Revise Federal Financial Assistance Guidance

The Office of Management and Budget (OMB) on May 29 issued a proposed rule that aims to improve government-wide policies and requirements related to the management of grants, cooperative agreements, and other forms of financial assistance. OMB states that the proposed revisions intend to improve transparency, accountability, and oversight in federal grantmaking while reducing recipient burden. In practice, however, many of the rule's provisions would significantly increase administrative requirements and financial risk for recipients. Comments for this proposal are due July 13.

The proposed rule would convert the government-wide grants framework in subtitle A of Title 2 from guidance into expressly binding OMB regulation. Under this structure, future OMB amendments to the framework would take effect government-wide on OMB's effective date, without requiring separate rulemaking by individual agencies.

The rule would prohibit the use of federal awards that promote or support diversity, equity, and inclusion programs; theories of disparate-impact liability based on protected characteristics such as race or sex; and gender transition of children under 19.

The rule also would clarify and expand federal agencies' authority to terminate or suspend discretionary awards that no longer effectuate program goals, federal agency priorities, or national interest. It would additionally eliminate fixed amount awards and subawards entirely, requiring conversion to cost-reimbursement arrangements. Non-state recipients and subrecipients must include written justifications for all payment requests describing the specific award-related activities the payment supports.

The rule proposes new obligations for pass-through entities, including hospital systems that distribute federal funds to subrecipients. Subawards must be reported to SAM.gov, and pass-through entities must ensure subrecipients do not "significantly damage" the reputation of the pass-through entity or federal government.

OMB notes that revised hospital cost principles will be addressed in future rulemaking.

Contact Director of Policy Rob Nelb, MPH, at [email protected] or 202.585.0127 with questions.